How have the recommendations of the 14th Finance Commission of India enabled the States to improve their fiscal position? (Answer…

How have the recommendations of the 14th Finance Commission of India enabled the States to improve their fiscal position? (Answer in 150 words) 10 marks

हिंदी में प्रश्न पढ़ें

भारत के 14वें वित्त आयोग की संस्तुतियों ने राज्यों को अपनी राजकोषीय स्थिति सुधारने में कैसे सक्षम किया है? (उत्तर 150 शब्दों में दीजिए)

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Model answer

Drafted with AI by UPSC Answer Check against this question's marking rubric, to the 150-word length. UPSC does not publish answers for Mains — this is one way to score well, not an official key. How we build rubrics and answers.

The 14th Finance Commission shifted state finance toward untied, formula-based transfers.

Higher untied share: It raised the states' share in the divisible tax pool from 32% to 42%, putting unconditional revenue directly into state budgets. Coinciding with the rationalisation of Centrally Sponsored Schemes, this let states match spending to local priorities. Its horizontal formula (income distance 50%, population 27.5%, area 15%, forest cover 7.5%) favoured less-developed states and rewarded forest cover.

Grants: Post-devolution revenue-deficit grants under Article 275 supported up to 11 states, including Assam, Himachal Pradesh and Jammu & Kashmir. Local-body grants of about ₹2.87 lakh crore went to panchayats and urban local bodies, backing the 73rd and 74th Amendments and easing pressure on state budgets, while State Disaster Response Fund allocations covered relief spending.

How this answer will be evaluated

Framework: GS2: Governance, Development, and Social Justice

What earns full marks: Precisely identifies the 42% share and the three specific grants with their purpose.

Evaluation rubric

Each sub-part is marked on its own, against the marks and word limit printed on the paper.

The answer Explain the specific mechanisms of the 14th Finance Commission that improved state fiscal health. 10 marks · 150 words

explain— definition/context → points in order → small example → short close
Must cover
- Mention the increase in states' share of divisible taxes to 42%.
- Explain the shift from conditional grants to unconditional grants.
- Identify the grants: post-devolution revenue deficit grants, local body grants, disaster relief (SDRF)
- Link the grants to the 73rd/74th Amendments (Panchayati Raj/Municipalities).
Loses marks
- Reciting general fiscal policy without specific 14th FC details.
- Confusing 13th and 14th Finance Commission recommendations.
- Failing to mention the specific grant types.
Earns more
- Mention the reduction in vertical fiscal imbalance.
- Note the focus on 'equalization' of states.
- Reference the horizontal devolution criteria (income distance, population, area, forest cover)
- Mention local body grants (about ₹2.87 lakh crore)
Extra mark
- Cite the specific percentage increase (32% to 42%).
- Mention the 'Post-Devolution Revenue Deficit Grant' specifically

What "Explain" is asking you to do

Make the working of something clear — what sets it off, what follows from what, and what it produces. Explain is the Commission's mechanism word: it dominates the technical papers and the “explain why” stems, where the marks sit in the causal chain and not in the label.

Structure that answers it

State what it is → the initiating condition → the chain of cause, step by step → an instance where it plays out → what the chain produces

Where marks are lost

Describing what something looks like instead of why it works that way. Naming the stages without linking them reads as description too.

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